Last month the SEC issued Staff Legal Bulletin No. 14E, which among other things amends the Commission’s policy regarding risk-based shareholder proposals. The new policy may make it harder for a company to ignore a proposed shareholder resolution concerning climate change.
Under SEC Rule 14a-8(i)(7), companies are permitted to exclude shareholder proposals from the company proxy statement dealing with a matter relating to the company’s ordinary business operations. Previously, the SEC permitted companies to exclude a proposal under this rule to the extent the proposal focused on a company engaging in an internal assessment of risk the company faces as a result of operations. The SEC has now clarified that the fact that a proposal requires an evaluation of risk does not mean it may be automatically excluded.
This change in analysis could be an opening for shareholder proposals regarding climate change risks for which the underlying subject matter of the proposal “transcends the day-to-day business maters of the company.” Such proposals may be more likely to gain entrance to the company proxy.